1.) Karen Company reported net income for a 2-years period as follows:

2017 -Php 120,0002018 -Php 180,000

In an audit of the financial statement for the year ended December 31, 2017, the following errors were discovered:

• Advances to supplier in 2017 were recorded as purchases but the merchandise was received in the following year - Php 20,000
• Advances from customers in 2017 recorded as sales in 2017 but the goods were delivered in the following year - Php 50,000
• On December 31, the ending inventory was overstated by Php 25,000

Required:Answer the following:

• Compute for the adjusted net income in 2017 and 2018 and the Retained Earnings as of December 31, 2017 and 2018.
• Give the effect of the error in the 2017 working capital
• Prepare the adjusting entries assuming the respective errors were discovered in (a) 2017; (b) 2018 and (c) 2019.